EU asks Italy - very carefully - to explain its finances

Lorne Cook and Frances d'Emilio

Jun 13, 2019 — 8.41am

Brussels | Europe's economy commissioner is urging the Italian government to quickly provide any new information it might have to explain its high debt levels or face the prospect of imminent legal action.

Pierre Moscovici told reporters on Wednesday (Thursday AEST) that "we stand ready to take into account any new elements that Italy may put forward, but let's not waste time."

Moscovici said the commission is "committed to an intelligent and flexible application of our fiscal rules," but he added that "no one should be in doubt that we will apply those rules if the criteria are not fulfilled."

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The commission believes an "excessive deficit procedure" should be launched against Italy, and the EU's financial economics committee agrees that action is warranted. EU member states must agree for it to happen, and Moscovici expects eurozone countries to back the commission's findings at a finance ministers' meeting Thursday.

Deputy Premier Matteo Salvini has been emboldened by his right-wing League party's strong gains in the May EU elections. ANSA

The threat of action comes at a time of rising tensions between Brussels and the Italian government, in particular Deputy Premier Matteo Salvini, who has been emboldened by his right-wing League party's strong gains in the May EU elections.

Italy's debt load is the second-highest in Europe, after Greece. Many fear new financial turmoil in Europe should Italy lose control of spending, but the government in Rome says it must spend more to jumpstart growth after years of austerity.

"The high debt is a major vulnerability for the economy and it's in Italy's interest to tackle this," he said.

In Rome, Italian Premier Giuseppe Conte led a huddle on Wednesday over the looming possibility of EU disciplinary action. He conferred with his two populist deputy premiers, Salvini and Luigi Di Maio, joined by Economy Minister Giovanni Tria, who has been trying to satisfy the EU and defend his government's agenda.

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Salvini emerged combative as usual toward Brussels.

Speaking on a video on his Facebook feed, he said the commission was "delegitimised by the vote of millions of Europeans," and that Brussels "can't take decisions or impose choices or sanctions on governments and peoples."

While Luigi di Maio shares the deputy prime minister office with Salvini, there are differences of opinion between his 5 Star movement and the League on how to rescue the fourth-biggest European economy. Bloomberg

He said the government wants to dialogue with Europe "as equals and with equal dignity." Salvini denied the government would take unpopular debt-fighting measures like taxing Italians' savings. Instead he pushed for broader tax amnesties, which he prefers to call "fiscal peace" initiatives aimed at raking in revenues.

The Italian prime minister sounded a somewhat optimistic note. Conte suggested the country would be able to "reduce the debt in a manner that perhaps not even we expected" due to having "more than we had prudently estimated." He didn't go into details.

Conte said he would write to EU institutions to convey that Italy wants to respect the stability and growth pact. On the other hand, he said he also would make plain "it's the moment to face and update the EU rules."

At an event in Rome, the economy minister argued it was in the interests of both Brussels and Rome to reach a compromise.